The jewels under SD Property

The property developer will continue to dispose of its non-core assets in order to manage its resources more efficiently

By NG MIN SHEN / Pic By TMR File

Sime Darby Property Bhd (SD Property) is one of the country’s largest property developers in land areas and gross development value (GDV).

On the local stock market, the developer, which builds not just homes, but townships like Subang Jaya and Bukit Jelutong, is the third-largest property company based on market capitalisation.

The company, recently demerged from the old Sime Darby empire, is valued at RM8.09 billion, trailing the two largest firms SP Setia Bhd (RM10.65 billion) and IOI Properties Bhd (RM9.03 billion). The big three already account for about one-third of the total market capitalisation of about RM90 billion for all the property stocks on the local bourse.

The group became a standalone property company after its prior parent, Sime Darby Bhd, underwent a demerger exercise in November last year in a move aimed at unlocking further value and creating investee companies with focus on their core businesses.

Subsequent to the demerger, SD Property and Sime Darby Plantation Bhd were listed as separate entities on Bursa Malaysia Bhd, while the trading and logistics, and motors businesses remained with Sime Darby.

At a recent press conference, SD Property announced it would continue to dispose of its non-core assets in order to manage its resources more efficiently.

The property company recently appointed former central bank governor Tan Sri Dr Zeti Akhtar Aziz as its chairman. She is also the group chairman of Permodalan Nasional Bhd (PNB), a major shareholder in SD Property.

Markets expect changes at PNB’s stable of companies, including at SD Property.

The admired central banker chaired her first board meeting at SD Property at the end of last month.

SD Property has made public their intention to hive off the non-strategic parts of its vast landbank and other commercial assets under management.

Zeti’s entry could speed up the move as the property developer seeks to boost profit and return much of the attention to developing property.

What Do They Have?
The group has about 20,572 acres (8,325.19ha) of developable area with a GDV of RM89.3 billion as of June 30, 2018. Twenty-three townships are currently being developed on 12,026 acres of existing landbank.

PublicInvest Research in a note early this year said the company has been recording property sales at an average of RM2 billion annually for the last few years, making the value in its holdings “too big to ignore”.

The landbank was valued at RM18.8 billion in total, giving the company the room to embark on asset monetisation, including disposing of non-strategic land.

Analysts expect SD Property to either seek direct disposal or form partnerships to develop its large tract of landbank.

The property developer would take about 50 years to develop the landbank base on its current annual sale.

The company is already considering the disposal of non-core assets, including a 300-acre parcel of land in Bukit Selarong, Kedah, other assets in Jerai, Kedah, and a small estate in Sabah. The company’s latest sale was the Glengowrie Estate in Selangor during its financial year ended June 30, 2017 (FY17).

Asset sales have helped to boost its financial number. For FY18, it reported a net profit of RM640 million for the year, helped by two sale transactions.

The gains included disposals of Malaysia Land Development Co Bhd and the 40% equity stake in Seriemas Development Sdn Bhd, boosting its revenue by about RM317 million.

But net profit for the final three months dropped to RM46.57 million from RM327.65 million during the corresponding period a year ago.

Disposal of Assets
The old Sime Darby in 2015 sold 135 acres of Elmina land to Eastern & Oriental Bhd (E&O) for RM48 million, Subang Avenue Mall (RM55 million) and its 50% stake in its Sunsuria Bhd joint venture (RM157 million).

It also disposed of a 375-acre plot of Serenia City to Sunsuria and 238 acres of Semenyih land for RM320 million.

Properties like the Equatorial Hotel in Melaka and two Singaporean properties were sold for RM486 million.

Disposal of the assets under the leisure and hospitality division could be on the cards. The division incurred RM26.4 million of loss for FY18, compared to RM14.7 million a year ago. To stop the bleeding, SD Property has other jewels in the crown.

The developer for high-end properties in Kuala Lumpur owns TPC Kuala Lumpur (TPCKL), a 36-hole course that sits on one of the most expensive areas in the capital; Sime Darby Convention Centre (SDCC), which sits near to TPCKL; and the 18-hole Impian Golf and Country Club.

These assets are managed by SD Property’s leisure and hospitality arm. The company in its financial result brief said the division reported higher operating losses due to lower contributions from SDCC and TPCKL.

The company is managing commercial spaces measuring about two million sq ft, which include Melawati Mall and KL East Gallery.

SD Property’s other assets that could be put under the hammer are Darby Park Serviced Residences (Australia), Darby Park Executive Suites (Singapore) and Darby Park Serviced Residences (Vietnam).

As the company looks to boost revenue, finance new and current developments, and trim its RM2.54 billion total debt, the disposal of its non-core assets would likely be a key component of the developer’s forward thinking.